Qualcomm probe raises risk of doing mainland China business

The risks of doing business on the mainland are substantial and have increased since the National Development and Reform Commission launched an investigation into US wireless technology firm Qualcomm, warned Policy and Regulatory Report, a news service subsidiary of Mergermarket.

The international publisher of information on mergers and acquisitions said foreign companies looking to do business in China should be aware that its antitrust regulators were now stepping up enforcement of competition rules, adding there was an increased tendency by regulators to go after big firms suspected of antitrust infringements.

Qualcomm announced on November 25 that the NDRC had launched a probe into the group relating to the mainland's anti-monopoly law. The statement came after reports that the NDRC will set up antitrust investigations in six industries - vehicles, aviation, home electric appliances, chemicals, telecommunications and pharmaceuticals.

However, a study by Freshfields Bruckhaus Deringer, an international law firm, found that business risks in China were not as bad as in some other places around the world.

The study found that 25 per cent of deals in China faced problems of various kinds, which compared favourably with a figure of 60 per cent in Indonesia, 43 per cent in Mexico and 83 per cent in India. The problems include regulatory investigations, government opposition and legal disputes.

By comparison, in Argentina, the Democratic Republic of Congo, Uganda, Ukraine, Ghana and Israel, all deals faced problems, according to the study, although this was the result of a small sample size, said Edward Freeman, a Freshfields partner.

Freshfields studied 132 deals valued at US$750 million or more in developing countries for its report.